Rising Unemployment Raises Specter of Recession in Japan : Economies: Industrial production also fares poorly. Meanwhile, trade official calls for earlier auto talks.

As Japan girds for a trade brawl that is already forcing retrenchment here, the government announced Tuesday that Japanese unemployment rose in April to its highest level in more than 40 years and that industrial production dropped.

The bad economic news--which raises questions about whether Japan could lapse back into recession--reflects troubles ranging from the strong yen to the devastating Kobe earthquake. It comes as Tokyo and Washington are arguing over where and when to resume their contentious talks on auto trade.

Minister of International Trade and Industry Ryutaro Hashimoto, speaking at a Tokyo news conference, rejected a suggestion made last week by U.S. Trade Representative Mickey Kantor that auto talks be held in Washington on June 20-21. He urged instead that they begin in Geneva, site of the newly established World Trade Organization, no later than June 15.

The bilateral talks would seek to head off Washington’s threat to impose $5.9 billion in taxes on 13 models of imported Japanese luxury cars beginning June 28 unless Tokyo agrees to expand foreign access to the Japanese market for automobiles and auto parts.

Hashimoto said Tuesday that the threatened sanctions are already hurting Japanese auto makers and will have “serious effects” on both Japanese and American industry. He said Washington should “lend an ear to global opposition” to its “unilateral measures.”

The impact on Japanese auto makers was underscored Tuesday as Toyota Motor Corp., Mitsubishi Motors Corp. and Honda Motor Co. all said they will slash production of affected models starting next month.

Toyota said it will cut monthly production of five Lexus models to 3,000 cars from 8,000, and Mitsubishi said it will eliminate the planned June production of 230 Diamante cars for export to the United States. Honda said June production of its Legend autos, which had been set at nearly 1,000, will be cut by as much as half.

Honda, which decided earlier this month to stop shipping its affected luxury cars to the United States, Tuesday offered the first official estimate from a Japanese manufacturer on how damaging sanctions might be.

The company said that if the 100% tariffs are carried out, they could cost the firm as much as $210 million, or more than half its projected profit for this year. But cost cutting might reduce the severity of the impact, it added.

However, if sanctions are imposed and auto firms respond with cost-cutting measures, that could help push Japan back into recession.

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The official government view of the economy, as expressed in monthly reports by the Economic Planning Agency, is still that Japan is in a “gradual recovery.” But a senior official of the Ministry of International Trade and Industry, briefing reporters Tuesday on condition of anonymity, said he believes “the economic recovery is weakening.”

Statistics released Tuesday show a 0.2% jump in unemployment during April compared to March, and a 0.2% drop in industrial production, with further drops in industrial production predicted for May and June.

Weaker industrial output, including that of automobiles for export, reflects yen appreciation last year, not its most recent surge during March, MITI statistics chief Harumi Takahashi said. That means the main effect on production of the yen’s appreciation this spring remains to be felt.

The surge in unemployment brought the official unemployment rate to 3.2%. Though that seems low compared to other advanced industrial nations, it is the highest level in Japan since 1953, when the country adopted its current method for calculating unemployment.

The previous record high was 3.1%, reached in May, 1987, when Japan was adjusting to a mid-1980s round of rapid yen appreciation.

The current U.S. unemployment rate is 5.8%. But analysts say that calculated by American rules, Japan’s jobless rate would now be about 5% to 8%--in other words, roughly equal to or perhaps exceeding that of the United States.